Our View: Adrian should OK restoring millage

One of the more complex issues facing local voters Tuesday, Nov. 5, is the city of Adrian’s request to rebuild its property tax millage rate to where it stood for most of the last several decades.

The so-called “Millage Restoration Proposal” will result in restoring a rate of 15 mills. That will produce somewhat higher tax bills — about $50 for the average taxpayer — but we believe it deserves a “yes” vote.

Basically, the 1978 Headlee Amendment to Michigan’s constitution set automatic reductions when the tax base grows faster than inflation. The purpose was to stabilize communities’ tax base and to protect property owners from tax bills that grew unusually fast when property values soared.

That was often the case. Property values jumped, so the city’s millage rate automatically went down, falling from 15 mills to its current rate of 13.6293 mills.

However, the Headlee Amendment did not include any automatic millage increase when property values fell. Adrian’s average home value has dropped from $114,500 in 2007 before the national housing collapse to $70,000 now.

Instead, the act left it up to voters whether to restore millage losses up to the maximum rate. That’s something local school districts have asked for and received on a regular basis.

Adrian city leaders, however, tried to weather the downturn without seeking a millage hike. As a result, according to city figures, the average Adrian property owner’s city tax portion is about $110 less than in 2007. (That does not include the larger portion of property taxes that are collected by the city but passed along to schools, county agencies and separate taxing entities.)Restoring the rate to 15 mills would bring the city about $514,000 next year. The millage would resume dropping if property values continue to rise faster than inflation.

While we enjoy the lower tax rate, we believe restoring the city’s millage now is important for several reasons.

First, while property values (and taxable values) can collapse quickly in bad times, tax values can only rise slowly. Increases are limited to the rate of inflation or 5 percent, whichever is less. Based on the current inflation rate of about 1.5 percent, officials estimate it will take 20 years before taxable values return to their 2007 levels. Coupled with the lower millage rates, it’s been a double-cut for city property tax revenue.

Second, city revenue is expected to take another cut next year with changes to the state’s personal property tax law. An estimated $110,000 per year will be lost.

Finally, Adrian has already cut almost $4 million per year from general fund spending, including this year’s elimination of its recreation department. Among other savings, 42 full-time positions have been trimmed since 2005, employee health care premiums have gone up, and no cost-of-living pay increases have been awarded since 2008. Adrian’s ratio of six city workers per 1,000 residents is half the state average, and even less (37 percent) of the U.S. average.

Compared with other options such as separate millages for police or fire service, further big cuts or reliance on temporary fixes such as reserves or short-term windfalls, we believe restoring the millage rate is the best option the city has now. We urge Adrian voters to vote “yes” on the restoration proposal Tuesday.